SkyWest Airlines 2007 Annual Report Download - page 21

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our markets and to quickly discount and restructure fares. The airline industry is particularly susceptible to price discounting
because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats. Increased fare
competition could adversely affect our operations and the price of our common stock. The airline industry has undergone
substantial consolidation, and it may in the future undergo additional consolidation. Recent examples include the merger
between America West Airlines and US Airways in September 2005, and American Airlines’ acquisition of the majority of
Trans World Airlines’ assets in 2001. Several of the major airlines are currently in discussions related to consolidation in the
industry. Other developments include domestic and international code-share alliances between major carriers, such as the
“SkyTeam Alliance,” that includes Delta, Continental and Northwest, among others. Any additional consolidation or
significant alliance activity within the airline industry could limit the number of potential partners with whom we could enter
into code-share relationships and materially adversely affect our relationship with our code-share partners.
Terrorist activities or warnings have dramatically impacted the airline industry, and will likely continue to do so.
The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry in
general, including our operations. The primary effects experienced by the airline industry include a substantial loss of
passenger traffic and revenue. Although, to some degree, airline passenger traffic and revenue have recovered since the
September 11th attacks, additional terrorist attacks could have a similar or even more pronounced effect. Even if additional
terrorist attacks are not launched against the airline industry, there will be lasting consequences of the attacks, including
increased security and insurance costs, increased concerns about future terrorist attacks, increased government regulation and
airport delays due to heightened security. Additional terrorist attacks and the fear of such attacks could negatively impact the
airline industry, and result in further decreased passenger traffic and yields, increased flight delays or cancellations associated
with new government mandates, as well as increased security, fuel and other costs. We cannot provide any assurance that
these events will not harm the airline industry generally or our operations or financial condition in particular.
Fuel costs have adversely affected, and will likely continue to adversely affect, the operations and financial
performance of the airline industry.
The price of aircraft fuel is unpredictable and increased significantly during much of 2007. Higher fuel prices may
lead to higher airfares, which would tend to decrease the passenger load of our code-share partners. In the long run, such
decreases will likely have an adverse effect on the number of flights such partner will ask us to provide and the revenues
associated with such flights. Additionally, fuel shortages have been threatened. The future cost and availability of fuel to us
cannot be predicted, and substantial fuel cost increases or the unavailability of adequate supplies of fuel may have a material
adverse effect on our results of operations. During periods of increasing fuel costs, our operating margins have been, and will
likely continue to be, adversely affected.
We are subject to significant governmental regulation.
All interstate air carriers, including SkyWest Airlines and ASA, are subject to regulation by the DOT, the FAA and
other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The
FAA requires operating, air worthiness and other certificates; approval of personnel who may engage in flight, maintenance
or operation activities; record keeping procedures in accordance with FAA requirements; and FAA approval of flight training
and retraining programs. We cannot predict whether we will be able to comply with all present and future laws, rules,
regulations and certification requirements or that the cost of continued compliance will not have a material adverse effect on
our operations. We incur substantial costs in maintaining our current certifications and otherwise complying with the laws,
rules and regulations to which we are subject. A decision by the FAA to ground, or require time-consuming inspections of or
maintenance on, all or any of our aircraft for any reason may have a material adverse effect on our operations. In addition to
state and federal regulation, airports and municipalities enact rules and regulations that affect our operations. From time to
time, various airports throughout the country have considered limiting the use of smaller aircraft, such as our aircraft, at such
airports. The imposition of any limits on the use of our aircraft at any airport at which we operate could have a material
adverse effect on our operations.
The occurrence of an aviation accident would negatively impact our operations and financial condition.
An accident or incident involving one of our aircraft could result in significant potential claims of injured passengers
and others, as well as repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from
service. In the event of an accident, our liability insurance may not be adequate to offset our exposure to potential claims and
we may be forced to bear substantial losses from the accident. Substantial claims resulting from an accident in excess of our
related insurance coverage would harm our operational and financial results. Moreover, any aircraft accident or incident, even
if fully insured, could cause a public perception that our operations are less safe or reliable than other airlines.